Frontier Spirit - Samsung Heavy Industries
-- FROM THE FULL PICTURE MAGAZINE -- Samsung Heavy Industries turned its back on low-tech bulk carrier building and never looked back. Today the Geoje Island-based giant boasts 80 per cent of the market for drillships, 28 per cent for LNG carriers and will perhaps be the first major Asian shipbuilder to challenge Europe's lock on cruise ships.
Late last year, celebrity investor Warren Buffett told BusinessWeek that Korea was "one of the world's most attractively priced markets." This is mostly down to the country's shipbuilding performance. Each of its big three yards – Samsung Heavy Industries (SHI), Daewoo Shipbuilding and Marine Engineering and Hyundai Heavy Industries – picked up orders in excess of USD 20 billion in 2007.
Each drillship order adds as much as USD 1 billion to this total, each FPSO between one and two billion and each drilling rig around a half-billion, depending on its sophistication. Samsung Heavy Industries reported offshore sales in the vicinity of USD 6 billion in 2007. As Korean yards strive to put distance between them and Chinese up-starts, SHI is investing in new skills and partnerships to further its reach in offshore projects, LNG technology and other tonnage.
Mr. Sang-Hoon Bae, a Vice President for Outfitting Engineering at SHI who has worked on a dozen different FPSO and drillship projects, talked to the Full Picture magazine about the yard's effort to distinguish itself in the offshore sector, and in high-tech LNG newbuildings.
"The future is ours. We aim to be the world's leading shipbuilder by 2010. To reach and sustain this position, we'll focus on the leadership in technology of our high-end products, our strength in production management systems and cost control, as well as constant investment in intellectual property and human resources," he said. "We have implemented special programmes with key sub-contractors like Kongsberg to secure our partnership and reach our goals in technology and project management."
World's leading LNG carrier builder
An article in Lloyd's List last November credited SHI with 28 per cent of the LNG carriers now on order, putting it just in front of neighbouring rival DSME as the top shipyard for this segment. With demand for gas growing by over 2 per cent per year globally and the fleet expanding to 400 ships by 2012, the market will stay hot. SHI's strategies in this area are manifold.
"We see a boom in the current and future demand for LNG carriers. The number of orders came to a lull in 2007, but it's still a strong area. We expect to see the Chinese shipyards to compete with us here in the next few years. One of our key strategies will be to build specialty vessels demanding high levels of technology," said Bae.Halfway through last year, news emerged that Korean shipyards had reinvigorated their efforts to develop a domestic design for an LNG carrier containment system. This is only one of the yards' tactics to reduce the price of LNG carrier newbuildings. For SHI, however, the focus seems to be on cornering the high-end of the market, rather than clutching ever more tightly at its lower ends.
Among the yard's many prestigious LNG carrier contracts was one for the building of two SRV's (shuttle and regasification vessels) for Höegh LNG and Mitsui OSK Lines (MOL). These vessels promise to lead celebrated lives delivering gas directly to the US East coast, even if they are designed specifically to be out-of-sight.Another novel LNG carrier delivery from SHI will be a series of three purpose-built 90,000 m3 LNG Producer units for Flex LNG. Here Samsung is described as a project partner, and the vessels will employ Samsung's proprietary SPB containment system. These vessels, like the SRVs, aim to bring a new innovative approach to the LNG value chain (in this instance, producing LNG offshore for shipment straight to market).
Other high-profile, non-conventional LNG carrier deliveries by SHI include a number of Qatargas Q-FLEX vessels (one magnitude larger than past LNG carriers), and dual-fuel powered LNG carriers for Chevron and BG. Thanks to its performance on such new conceptual projects, the yard is well-placed when the first order for an LNG FPSO finally comes (Höegh LNG is one of at least two multinational teams racing to develop one).
"Subcontractors play a key role in the success of Samsung. We groom several subcontractors to meet our continuous demand for customised high technology solutions in the outfitting area. Kongsberg is one of them," said Bae.
The UK's Royal Institution of Naval Architects recently named three SHI-constructed ships in its best vessel awards for 2007. Among them, the drillship Stena Drillmax qualifies less as a ship than an offshore facility. It can hold a secure position in 16 meter waves and 41 meter per second winds, operate in temperatures as low as -40 Celsius and drill down to 11,000 meters. It is only one of a string of drillships constructed by SHI, which sees offshore construction taking up a steadily larger chunk of its orderbook.
"Our ambition is to be a world leader in building specialty vessels. We see the offshore market growing until 2010 and then stabilizing, and we are currently implementing plans to cater to this market growth," said Bae.
With a dozen years in conceptual engineering of FPSO hulls, Bae has some perspective on the business. "Critical dimensions in FPSOs include Safety Offshore standards, maritime standards and customer-specific requirements. The energy companies are demanding larger capacities, and reliable and effective safety, in their FPSOs, as well as flexibility for future conversion and expansion," said Bae.
Evidence of SHI's growing strength, in the FPSO business, comes first from its recently-demonstrated ability to win contracts in topsides fabrication and installation, which it has done with both BP (Skarv) and Nexus Floating Production (Nexus 1). Work on Nexus 1 includes engineering.
Facts about Samsung Heavy Industries
- Established in 1974 on Geoje Island
- Four major products: Commercial vessels (mostly container), offshore units, specialized vessels and LNG carriers
- Production capacity: 24 specialized vessels such as LNG carriers, 4 offshore & onshore plants and 19 commercial vessels (2006)
- Employed approx. 12,500 at end-2006, including 1,200 design and R&D personnel and over 7,400 field workers. As many as 12,000 sub-contractors worked at the yard
- Sales of USD 6.4 billion in 2006, USD 9.8 billion in 2007
- Order backlog at the end of August 2007: USD 38 billion